EU plans to increase aid to Ukraine using frozen Russian assets

The European Union is developing a plan to increase aid to Ukraine, seeking to raise billions of euros from frozen Russian assets by transferring them into “riskier investments.”

This is reported by Politico, citing sources.

The EU executive is considering transferring nearly 200 billion euros in frozen Russian state assets held in Belgium to a new, riskier investment fund that would pay higher interest, four officials familiar with the process told the publication.

The goal is to generate more profit to help keep Ukraine’s war-torn economy afloat amid threats from US President Donald Trump to cut off funding. The assets were frozen in 2022 in response to Russia’s full-scale invasion of Ukraine.

However, this step will not lead to the complete confiscation of Russian assets, which is opposed by several EU states, including Germany and Italy, due to financial and legal concerns.

By spending only interest and leaving the underlying capital intact, the EU hopes to avoid accusations of violating international law.

Members of the G7 group of industrialized countries agreed last year to provide Ukraine with 45 billion euros, obtained from investing immobilized sovereign assets.

However, the EU’s share of €18 billion of the G7 loan will be fully disbursed by the end of the year, raising questions about how Ukraine’s financial needs will be met in 2026.

Finance ministers from the 27 EU countries will begin these discussions on Thursday at an informal dinner in Luxembourg.

“It is important that we hear from the Commission about the options available, especially regarding the potential use of frozen Russian assets and further steps regarding the sanctions regime,” Poland, which holds the rotating presidency of the Council of the EU and organized the meeting, wrote in a letter of invitation to ministers.

Warsaw also suggested that the EU’s new SAFE defense loan program could be used to purchase weapons for Ukraine.

Thursday’s meeting will mark the beginning of months of tense discussions as European capitals with stretched budgets become increasingly torn between continued support for Ukraine and domestic priorities.

As a potential workaround, EU officials are considering transferring assets from the Belgian company Euroclear to a “special purpose vehicle” under EU auspices.

The main advantage of quickly creating a new fund is that assets can be directed to riskier investments that can bring Ukraine significantly higher income. Officials did not specify what kind of investments this might be.

By its rules, Euroclear is required to invest assets — many of which have already been converted into liquid cash — in the Belgian central bank, which offers the lowest available risk-free rate of return.

In 2024, the profits generated from such investments amounted to 4 billion euros, which were later directed towards a G7 loan for Ukraine.

Supporters of the idea of creating a new investment fund argue that the EU should receive more income from frozen Russian assets to support Ukraine in the long term.

Another potential advantage is that it could be a useful safeguard against the risk that Hungary would try to veto the extension of sanctions and effectively return the money to Russia.

Russian assets are blocked by an EU sanctions regime that must be unanimously renewed every six months, and the Hungarian government, which has traditionally opposed aid initiatives for Ukraine, has repeatedly threatened to use its veto power.

The European Commission has held informal talks in recent weeks with a group of countries including France, Germany, Italy and Estonia to explore legal ways to preserve frozen assets if Hungary blocks the extension of sanctions, two officials told Politico. But the working group has not developed a workaround to achieve that outcome.

EU officials are looking at ways to approve the creation of the new fund by a simple majority vote — as opposed to unanimity — to circumvent expected resistance from Hungarian Prime Minister Viktor Orban.

Critics of the plan to create a new financing mechanism, however, warn that EU taxpayers will ultimately be forced to pay compensation for any potentially unproductive investments.

The EU is looking for creative solutions because its €1.2 trillion “central budget,” which governs all public spending, is overstretched, and the new budget will not come into effect until 2028.

“It will not be easy to find money within the current multiannual financial framework,” said one European diplomat.

A significant part of the 50 billion euros that the EU approved for Ukraine in 2023 and which were calculated until the end of 2027 has already been spent.

In addition to economic constraints, officials are skeptical about the idea of further replenishing the EU’s central budget because it requires unanimity — and Hungary is likely to resist.

Recall, Ukraine and the Japan International Cooperation Agency signed an agreement necessary to receive $3 billion under the Extraordinary Revenue Acceleration (ERA) initiative.

As reported, the Finnish government will send ammunition to Ukraine using profits from frozen Russian assets .

Also follow “Pryamim” on Facebook , Twitter , Telegram , and Instagram.